Blame Abounds Over a Flawed Foreclosure Review

Private consultants and federal regulators are facing a fresh round of scrutiny in Washington after botching a broad review of foreclosures and failing to thwart financial misdeeds.

A new report by the Government Accountability Office will take aim at the Federal Reserve and the Office of the Comptroller of the Currency for creating a bureaucratic maze that delayed relief to homeowners in foreclosure, according to a draft of the 74-page document provided to The New York Times. The regulators, the report found, designed a flawed review of troubled loans tht the consultants carried out and mishandled.

Adding to the scrutiny, the Senate Banking Committee plans to hold a hearing next week to examine the foreclosure review and other recent missteps at consulting firms like Promontory Financial and Deloitte & Touche, according to several people with direct knowledge of the matter. Senator Sherrod Brown, the Ohio Democrat leading the inquiry, is expected to broadly question the quality and independence of consulting firms that are paid billions of dollars by the same banks they are expected to police.

Regulators at the Fed and the Comptroller of the Currency’s office are likely to testify at the hearing, which is scheduled for April 11, according to the people briefed on the matter but not authorized to speak publicly. Mr. Brown’s office is also expected to invite executives from Promontory and Deloitte to testify.

The Senate hearing comes at a difficult time, particularly for the consultants. Regulators at the Fed and the Comptroller of the Currency’s office are questioning the prudence of relying on consultants so heavily, according to government officials briefed on the matter.

While regulators will continue requiring banks to hire consultants in times of stress, some officials say they are worried about the quality of the work. New York’s banking regulator, Benjamin M. Lawsky, is also investigating the use of consultants and could seek to impose greater oversight of the firms, a person briefed on the matter said.

Deloitte did not respond to a request for comment. In a previous statement, a spokesman for the firm said, “Deloitte fully stands behind the quality and integrity of its work on behalf of regulatory authorities.”

Promontory also issued an statement earlier that said, “From Day 1, Promontory strove to conduct its review work as thoroughly and independently as possible.”

The recent regulatory scrutiny represents a significant change for consultants, which have long enjoyed a privileged status in Washington. Promontory, which is run by the former comptroller Eugene Ludwig, announced this week that it had hired Mary L. Schapiro, the former chairwoman of the Securities and Exchange Commission. She was the latest official to move from a top government post to a consulting firm, a revolving door that has raised concerns about whether federal authorities will look the other way when consultants err.

The most recent problems emerged when the consultants â€" under orders from regulators to assess whether homeowners had been wrongfully evicted â€" racked up more than $2 billion in fees despite reviewing only a small fraction of foreclosed loans. The consultants’ delays and inefficiencies caused homeowners to languish and prompted regulators to scuttle the review and settle with banks for $9.3 billion. Even now, millions of homeowners have yet to receive relief. Last week, banks learned that the government would miss its internal deadline to issue checks to borrowers, according to people briefed on the matter. While authorities initially planned to release the payments to 4.2 million homeowners at the end of March, technical problems forced a temporary delay.

Melissa Jaime, 40, has been battling to save her home in Queens for three years. In the foreclosure fight, she has gone to court more than 21 times, aiming to reduce her monthly payments. “To me, this all sometimes feels like a cruel game,” she said.

The tales of anguished homeowners have prompted an outcry on Capitol Hill.

Senator Elizabeth Warren, Democrat of Massachusetts, and Representative Elijah Cummings, Democrat of Maryland, recently opened an inquiry into the consultants’ flawed review of foreclosure abuses. Representative Carolyn B. Maloney, Democrat of New York, also pressed regulators to disclose the consultants’ fee structure for the review.

Ben S. Bernanke, the chairman of the Fed, and Thomas Curry, the comptroller of the currency, replied to her request last week without detailing the payments or revealing the results of the review, saying that “we are currently in the process of developing and analyzing this information,” according to a copy of the letter.

Still, the regulators have not escaped criticism for their role in the bungled foreclosure review. The G.A.O.’s report traces problems to the regulators, not the consultants.

Throughout the review, the regulators provided inconsistent guidance to consultants, the report said. As a result, borrowers in similar situations were sometimes treated differently. For example, regulators ordered the consultants to comb through loans to spot whether borrowers had been charged fees for lawn care or property inspections that were not “reasonable” and “customary.” But the consultants were using different versions of what fees fell into those categories.

The report also faulted regulators for bogging down consultants with numerous metrics for identifying problems. One consultant reported having to answer 16,000 test questions regarding a single loan.

Homeowners paid the price, the G.A.O. report concluded. Struggling borrowers submitted requests for relief and “waited nearly a year before receiving an update,” the report said.

The flaws also created “timeliness trade-offs,” according to the report. Under the review guidelines outlined by the regulators, swaths of loans that might have had problems were potentially overlooked, the report found.

Representative Maxine Waters, the California Democrat who requested the report, said in a statement on Wednesday that she would soon “introduce legislation to address the problem of relying on outside contractors for enforcement actions.”

The regulators did not comment on the report, though they have previously said that the review was an ambitious undertaking intended to provide the first full assessment of wrongful foreclosures in the wake of the financial crisis.

In a statement to the G.A.O., Mr. Curry’s office said it “appreciates your understanding of the complexity” of the foreclosure review process and the “intent of your recommendations.” The office added that it would incorporate suggestions from the report into its future oversight of the banks. The Fed told the G.A.O. that it has “begun implementation of all recommended actions.”

Next week, the Senate hearing is likely to focus on the roles of both the regulators and the consultants. Using the foreclosure review as a starting point, Mr. Brown is expected to question regulators’ reliance on the industry.

The consultants, critics note, operate with scant supervision and produce mixed results. In one instance, Deloitte was accused of enabling Standard Chartered, a British bank, to process tainted money through the American financial system, a subject that Mr. Brown is expected to scrutinize.

The consultants also keep cozy ties to the banks they oversee. “It is worth considering the monitors’ lack of independence,” Mr. Lawsky said at a recent speech in Washington. “The monitors are hired by the banks, paid by the banks, and depend on the banks for future engagements.”

Suit by Ex-Wife of SAC’s Cohen Revived on Appeal

While the publicity-averse billionaire Steven A. Cohen has come under mounting legal scrutiny related to insider trading, he had reason to believe that a nasty court battle with his former wife was behind him.

But on Wednesday, a federal appeals court revived the lawsuit that Patricia Cohen, his ex-wife, had filed against him. The development adds another layer of difficulty to Mr. Cohen’s already complicated life, with continuing legal issues and multimillion-dollar art and real estate purchases.

Ms. Cohen’s lawsuit, filed in 2009, accused her former husband of hiding millions of dollars in assets at the time of their divorce more than 20 years ago. She also claimed that his hedge fund, SAC Capital Advisors, was a “racketeering scheme” that engaged in insider trading and other crimes.

The United States Court of Appeals for the Second Circuit in Manhattan, without addressing the merits of the case, said on Wednesday that the trial court judge improperly dismissed it on the grounds that Ms. Cohen filed her lawsuit after legal deadlines had lapsed.

“As we have said from the outset, these decades-old allegations by Mr. Cohen’s former spouse are patently false and entirely without merit,” said Jonathan Gasthalter, a spokesman for SAC, which is based in Stamford, Conn.

Also on Wednesday, Mr. Cohen and his advisers clarified the timing and amount of Mr. Cohen’s purchase of “Le Rêve,” a painting by Pablo Picasso that he purchased from the casino magnate Stephen A. Wynn.

Reports surfaced last week that Mr. Cohen had bought the Picasso for $155 million. That, coupled with news that Mr. Cohen paid $60 million for an oceanfront estate in the Hamptons, led to speculation that Mr. Cohen’s shopping spree was a statement of confidence that his legal problems were over or an effort to shield assets from the government.

News of the purchases emerged less than two weeks after SAC agreed to pay the government a record $616 million penalty to settle civil insider trading accusations against the fund. Mr. Cohen has not been charged with any wrongdoing, and has said he believes that he has at all times behaved appropriately.

Sandy Heller, Mr. Cohen’s art adviser, said on Wednesday that the sale was completed in early November of last year, a few weeks before the insider trading cases against SAC Capital entered a more serious phase with the indictment of one of his former employees, Mathew Martoma. The purchase price was $150 million, not $155 million, according to people with knowledge of the transaction.

“The timing was bad,” said Mr. Heller, referring to last week’s reports about the Picasso purchase. “We’re correcting the chronology.”

In an interview Wednesday, Mr. Cohen, a collector who also owns works by Jasper Johns and Damien Hirst, said that he had coveted “Le Rêve” for years. “When you stand in front of it, you’re blown away,” Mr. Cohen said.

Mr. Heller said that the deal for the Picasso â€" one of the most expensive private art sales ever consummated â€" came together quickly. In late October, Mr. Cohen received a phone call from William Acquavella, the Manhattan art dealer, with news that Mr. Wynn, his longtime client, was finally ready to sell “Le Rêve,” which was hanging in Mr. Acquavella’s gallery on the Upper East Side of Manhattan.

“We were at the gallery the next morning,” Mr. Heller said. “In three minutes we had a deal.”

Mr. Cohen originally had a deal in 2006 to buy the painting, which depicts the artist’s mistress, Marie-Thérèse Walter, asleep in an armchair. He had agreed to pay $135 million, but the sale was canceled after Mr. Wynn, who has a degenerative eye disease, put his elbow through the painting.

A Manhattan conservator, Terence Mann, restored the painting so that with the naked eye it is impossible to tell where Mr. Wynn punctured the Picasso.

“We had to step back, take a deep breath and see how the restoration would turn out,” Mr. Heller said. “This is a painting that has haunted Steve for nearly a decade.”

Mr. Cohen’s battles with his former wife have haunted him for 25 years. Mr. Cohen was 23 when he married Patricia Finke in 1979; they separated in 1988. In the lawsuit filed in 2009, she said that at the time of their divorce in 1990, Mr. Cohen said his assets totaled about $18 million. But she claimed that he lied about his net worth, hiding $5.5 million in assets related to a real estate investment. She sought $300 million in damages.

She also contended in the lawsuit that in 1985, Mr. Cohen made a $20 million profit by trading on a tip about the impending takeover of RCA by General Electric. The lawsuit said that Mr. Cohen told his former wife that it was not illegal to trade on the information. When questioned by the S.E.C. about his trading, Mr. Cohen invoked his Fifth Amendment right against self-incrimination. No charges were ever brought against Mr. Cohen related to that takeover.

The appeals court decision returns the case to a lower-court judge, but the case is not expected to go to trial for some time. Mr. Cohen’s lawyers could file additional motions to dismiss the case on other grounds.

Ms. Cohen’s revived lawsuit adds to her former husband’s legal distractions. On Friday, Michael S. Steinberg became the most senior SAC employee indicted in the government’s investigation of insider trading.

Mr. Steinberg, who has pleaded not guilty, was charged with participating in a ring that illegally traded technology stocks.

And Then There Were Two

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Government Watchdog Faults Regulators Over Foreclosure Review

Federal authorities plan to issue a stinging critique of how banking regulators responded to wide-ranging foreclosure abuses, blaming officials for a bureaucratic maze that delayed relief to homeowners.

In a long-anticipated report, the Government Accountability Office will take aim at the Federal Reserve and the Office of the Comptroller of the Currency for their role in cleaning up flawed foreclosures at the nation’s biggest banks, according to a preliminary draft of the document provided to DealBook. The regulators, the G.A.O. report found, failed to properly coordinate a review of foreclosed loans and even potentially allowed some errors to go undetected.

The regulators did not comment on the report. In a letter to the G.A.O., however, the Comptroller’s office said it “appreciates your understanding of the complexity” of the foreclosure review process and the “intent of your recommendations.” The agency added that it would incorporate suggestions from the the report into its future oversight of the banks.

People briefed on the report cautioned that it was not yet final and could still be changed. The G.A.O. is expected to release the report in the coming days.

The report stems from an investigation that began in 2011 at the behest of Congressional Democrats, including Representative Maxine Waters, who is now the ranking Democrat on the House Financial Services Committee. Ms. Waters raised concerns about the use of private consultants to conduct a sweeping review of the foreclosures. The consultants, tasked with unearthing whether homeowners were wrongfully evicted, had close ties to both the regulators and the banks they were expected to examine.

The report shows that lawmakers had reason to worry. The review was fraught from the start, according to the G.A.O., as consultants racked up more than $2 billion in fees while only reviewing a fraction of the loans in question.

Much of the report, though, traces problems to the regulators, not the consultants. From failing to coordinate teams of consultants to creating few clear guidelines for the review, the regulators shoulder much of the blame, according to the copy of the report.

Throughout the review, the regulators provided inconsistent guidance to consultants, the report said. As a result, even borrowers who suffered similar kinds of harm were treated differently. For example, regulators ordered the consultants to comb through loans to spot whether borrowers were charged fees for lawn care or property inspections that were not “reasonable” and “customary.” But the consultants were using “different versions” of what fees fell into that category.

The report also highlighted broad breakdowns in communications that led the review to stagnate, delaying relief to homeowners. Struggling borrowers, the agency said, submitted requests for relief and “waited nearly a year before receiving an update.”

The lack of direction, the report found, prevented the consultants from efficiently scouring the loan files to spot the most number of borrowers potentially harmed. The flaws also created “timeliness trade-offs” the report said. Under the review guidelines outlined by the regulators, whole swaths of loans that may have had problems were potentially overlooked, the report found.

Regulators, the agency found, also failed to provide “objective monitoring measures.”

There was no metric, for example, for consultants to figure out when to stop a review, the report found. As such, the report said, there was confusion in assessing the “extent of borrower harm.”

Without clear guidelines from regulators, the report found that there were troubling differences in how loans for each bank were assessed. Some consultants looked at a “100 loans in a sampled loan category” while others looked at more than three times that number. “Based on our analysis, the loan categories used by consultants for their analysis varied from review to review,” the agency found.

Judges Dismisses Dexia Claims Against JPMorgan Chase

A federal judge dealt a devastating blow to a lawsuit against JPMorgan Chase that accused the nation’s largest bank and its affiliates of duping investors into buying troubled mortgage-backed securities.

In a ruling on Tuesday, Judge Jed Rakoff dismissed the claims from Dexia, a Belgian-French bank that had sued JPMorgan over losses on $1.6 billion in 65 residential mortgage investments, according to court documents. FSA Asset Management, another plaintiff in the lawsuit, can continue to pursue its claims over five of the soured investments, with losses of more than $5 million.

The ruling significantly limits the potential legal bill from the case, marking a major victory for JPMorgan. The lawsuit was being closely watched on Wall Street, in part, because it could provide a window into another high-stakes case facing the industry.

In 2011, the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, accused 17 banks of selling $200 billion of dubious mortgage securities to the housing finance giants. At least 20 of the securities at issue were also included in the Dexia case, according to an analysis of court records.

The Dexia lawsuit, filed in 2012 in federal court in Manhattan, centered on complex securities created by JPMorgan, Bear Stearns and Washington Mutual during the heady days of the housing boom. As profits soared, the Wall Street firms churned out more investments, some of which imploded. Dexia, which has been bailed out twice since the financial crisis, lost $774 million on the securities, according to court records.

Lawyers for JPMorgan have been working to quash the Dexia lawsuit since it was originally filed. They tried to persuade the judge that Dexia did not have the legal standing to sue the bank, court records show.

Ultimately, Mr. Rakoff sided with the bank, according to several people familiar with the matter. The judge did not outline the reasoning underpinning his decision in Tuesday’s order.

Dexia’s lawsuit was part of a broad-ranging assault on Wall Street for its role in the financial crisis, as prosecutors, regulators and private investors target losses on mortgage-related securities. New York’s attorney general, Eric T. Schneiderman, for example, sued JPMorgan last year over investments created by Bear Stearns between 2005 and 2007.

For JPMorgan and its rivals, the legal woes have been costly.

In November, JPMorgan agreed to pay $296.9 million to settle claims by the Securities and Exchange Commission that Bear Stearns, which the bank bought in 2008, had misled investors by failing to disclose some problematic loans in the portfolio. JPMorgan did not admit or deny wrongdoing.

Separately, Citigroup agreed last month to pay $730 million to settle claims that the bank misled investors in securities backed by mortgage loans. The bank did not admit or deny wrongdoing.

Analysts say the mortgage-related bill poses one of the most severe threats to the industry’s profit. Citigroup said that it’s fourth quarter profit was cannibalized by a $1.3 billion legal bill.

As Business Lending Rises, Concerns Emerge About Profit

On the economic scene, it would seem heartening to see a surge in loans that banks are making to corporations of all sizes. The loans help finance business expansion, which may lead to jobs growth. And it shows that banks don’t have to pile back into real estate loans, recently the source of crippling losses, to grow.

But the recent spurt in bank business lending is starting to flash some warning signs.

The concern is that banks are making loans to businesses at rates that are so low that they may end up being unprofitable. A recent survey by the Federal Reserve shows that American banks are charging an average of just 2.83 percent on so-called commercial and industrial loans. That’s down from 3.4 percent a year earlier.

Banks of all sizes are participating in this resurgence, including smaller banks, which managed to avoid many of the excesses of the credit boom of the last decade. In an effort to find alternatives to real estate lending, some banks could be rushing into company loans without due care, says Claude A. Hanley Jr., a partner at the Capital Performance Group, a bank consultancy firm.

“The competition among banks has been fairly pronounced,” Mr. Hanley said. “So there is concern that this will lead to foolish terms to the borrower merely to win business in the short term.”

Overheated credit markets are a risk that comes with the immense monetary stimulus undertaken by the Federal Reserve to whip up economic growth. Extraordinarily low interest rates have breathed life into several markets where companies go to borrow. Last year, companies issued nearly $360 billion of junk bonds in the United States, according to Dealogic, a large number that has raised eyebrows in some quarters.

Less noticed, but still big, was the increase in commercial and industrial loans at American banks. They added $174 billion of such loans in 2012, a 13 percent increase from the prior year, according to figures from the Fed. Since 1990, the average annual growth for these loans is 4.2 percent.

It’s one thing to make the loans, but another to make money on them over time.

At first blush, the banks’ business loans look very profitable. Take the business loan portfolio at Huntington Bancshares, a regional lender based in Columbus, Ohio.

The bank’s commercial and industrial loans grew by a heady 16 percent last year and the business is a sizable contributor to its revenue. Last year, its business loans had an average interest rate of 4 percent, a nice fat yield for a bank that was able to finance itself for as little as 0.45 percent.

But the 4 percent figure is derived partly from older loans that have higher interest rates. As competition in this sector remains intense, it’s important to understand the profitability of the recent business loans. They may have a significantly thinner profit margin. That can be seen in a theoretical exercise that uses some of Huntington’s numbers.

Unlike some of its peers, Huntington actually discloses the interest rates on newly added commercial and industrial loans. The latest figure it gave was 3.38 percent for the third quarter of 2012.

Estimated costs then need to be subtracted from that figure. First, Huntington’s own financing costs, 0.35 percent in the last quarter of 2012, are taken away, to get net interest income of 3.03 percent on the business loans.

Huntington gets fees and other noninterest revenue from the commercial and industrial banking services it provides. But, as is the case at most banks, it has even higher noninterest expenses.

If this net expense is expressed as a percentage of assets, it comes to 0.59 percent for the division of Huntington that makes commercial and industrial loans. That number is then subtracted from the 3.03 percent net interest income yield on businesses loans. That trims their theoretical annual return to 2.44 percent.

Next, one big potential cost has to be factored in: estimated losses from when loans go bad.

In banking, those can be measured through something called “net charge-offs.” Since 1990, those have averaged 1 percent on commercial and industrial loans to American companies, though they spiked above 3.5 percent at Huntington in 2008 and 2009. To take into account the healthier economy today, it may make sense for this analysis to assume a markedly lower loss rate of 0.8 percent.

Subtracting that from the 2.44 percent, takes the business loan yield down to 1.64 percent.

Finally, the taxman’s take. Huntington expresses that as 35 percent for the division that makes commercial and industrial loans, which would reduce that figure to 1.07 percent.

The analysis does have shortcomings.

In traditional banking right now, earning just over 1 percent on loans after all estimated expenses, is hardly terrible when interest rates are so low.

And it is hard to generalize across the banking sector. Some lenders will prove better than others at commercial and industrial lending during this business cycle.

In theory, banks with strong, long-term relationships with corporate borrowers should be able to generate more business without compromising the quality of their loan books. James E. Dunlap, a Huntington executive who oversees commercial lending, says that if a borrower knows it is getting a valuable range of services from a long-time lender, it will be less tempted to take a cheaper loan from a competitor.

“When you take responsibility for the success of your customers, they will take the responsibility to buy multiple services from you,” said Mr. Dunlap.

Also, the analysis doesn’t take into account the fact that most business loans are structured in such a way that their interest rates would go up if benchmarks, like the London interbank offered rate, increase. In other words, it might be a mistake to assume that today’s low rates on business loans will persist into the foreseeable future.

Still, the Fed shows few signs of wanting to hoist interest rates. And competition between banks could prompt certain lenders to cut interest rates on commercial and industrial loans still further, leaving little room for error if this type of lending hits a rough patch.

Barclays’ Need for a Culture Change

The Salz review into management practices at Barclays shows just how much the bank needs a cultural renaissance. It pulls few punches in its assessment: The bank grew too fast, vested too much power at the top and became difficult to manage.

Given the revelations of the last nine months, the findings may strike some as unsurprising. They should be no less shocking for that.

The review cites the growth of investment banking under a former chief executive, Robert E. Diamond Jr. as problematic. The “Alpha Plan,” begun in 2003, sought to double revenue within four years. That encouraged employees to explore the murky area of structured tax solutions, which accounted for 18 percent of investment banking revenue for five years. True, Barclays wasn’t alone: think of UBS and its ill-fated foray into asset-backed securities via internal hedge fund Dillon Read Capital Management. But that’s no exoneration.

Yes, Barclays “Transform” programm means many of the report’s 34 recommendations are under way. Others, such as a proposal to include non-executive directors with banking experience, are obvious.

Much remains to be done on pay and management structure, however. Barclays needs to reshape its executive committee. When he was chief executive, John Varley restricted membership to between four and six people. Mr. Diamond, his successor, improved things but a too-small coterie of senior executives retained excessive control. And there’s still no human resources representative on Barclays’ board.

Long-term incentive plans, meanwhile, are too complicated and offered to too many. Barclays needs to prevent the sense of entitlement prevalent in the past from returning. The Salz report’s observation that compensation for the 70 best paid executives at Barclays was significantly above their competitors illustrates the scale of the challenge. It’s a lesson that has wider relevance for the financial industry.

Reforming culture at Barclays will take time, as the report says, and require perseverance. It will also require deftness of touch. The acronym-loving Mr. Jenkins, who introduced “LiMME” (Lives Made Much Easier) in 2010, needs to avoid overwhelming staff with new initiatives. Since many hard-nosed Barclays bankers may scoff at what they see as soft imperatives, the work of Anthony Salz provides helpful ammunition for those who seek to change the bank.

Dominic Elliott is a columnist at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Toronto-Dominion Announces C.E.O. Succession

The Toronto-Dominion Bank, which is pursuing an aggressive expansion into the United States, said on Wednesday that the head of its American operation would become its chief executive late next year.

Bharat B. Masrani will take over the bank when William E. Clark retires as president and chief executive in November 2014. To smooth the transition, Mr. Masrani will return to the bank’s head office in Toronto and become chief operating officer on July 1.

Mr. Masrani emerges from what was widely seen from the outside as a competition between several executives of the bank who, like him, have spent most of their working lives at Toronto-Dominion or Canada Trust, which Toronto-Dominion acquired along with Mr. Clark in 2000.

“It was always our desire to appoint internally,” Mr. Clark said in an interview. “The people who work at TD love the business model. If you’ve got really strong executives the best method is to go with people internally who will continue to go with that business model.”

While Canada’s banking system is overwhelmingly dominated by the country’s five largest banks, Mr. Clark concentrated his efforts on retail banking, a profitable segment that many banks had largely taken for granted. A former senior bureaucrat with the federal government who had also worked at Merrill Lynch, Mr. Clark introduced conveniences like longer hours at Canada Trust that, while common generally in retailing, were unknown in Canadian banking. Compensation throughout the bank also became tied to results from customer satisfaction surveys.

Mr. Clark then successfully transposed that template on Toronto-Dominion, making it the largest retail banker in Canada.

Toronto-Dominion also became an exception to Canadian banking with its successful foray into the United States, a move that has brought other Canadian banks more grief than growth. The conservative management style of Canadian banks, including Toronto-Dominion, and tighter regulations in Canada meant that they remained healthy financially during the crisis of 2008.

With its strong balance sheet, Toronto-Dominion took advantage of the weakness in the American financial system to bargain hunt. Among other things, it spent $8.6 billion to acquire Commerce Bancorp of New Jersey in 2008 and followed that with a $6.3 billion acquisition of Chrysler Financial in 2011.

Mr. Masrani, who was Toronto-Dominion’s chief risk officer before he went to the United States, said that turning around American operations was not as simple as just applying the methods used by Toronto-Dominion in its home market.

“The U.S. banking environment is to some extent different than the Canadian banking environment,” Mr. Masrani said, adding that it demanded numerous, if small, adjustments to the bank’s standard methods.

He said the American banks had also exported some new tricks to Canada, including Sunday branch openings and coin-counting machines in branches.

Mr. Masrani will be succeeded as head of Toronto-Dominion’s American operation, which is based in Cherry Hill, N.J., by Michael Pedersen, who currently runs the bank’s wealth management and insurance businesses.

Timothy D. Hockey, who manages Canadian banking and Toronto-Dominion’s credit card business, and Colleen M. Johnston, the chief financial officer, will gain additional responsibilities over the coming year. Both were seen as possible successors to Mr. Clark.

Mr. Clark said the bank’s emphasis on American expansion and Mr. Masrani’s appointment did not signal an end to its Canadian growth plan.

“It’s always a mistake in any business to ignore your home base,” he said, noting that Toronto-Dominion acquired the Canadian credit card operations of MBNA in 2011.

But he said that if Canada’s economy slowed as expected at the same time as the United States was rebounding, the growth of the bank’s American operations might outpace that of its home market units.